Credit cards are the easiest way to spend money we don’t have, which in itself is a dangerous concept, but coupled with an unfettered desire for material goods, it’s the perfect trap.
But you don’t have to a be fiend for shopping to get caught out, as even thrifty individuals can find themselves in a world of pain following some poor decisions.
Here are the biggest mistakes you’re making and why you need to sort your shit out.
Avoid multiple credit cards
Every time you apply for a credit card, it goes on your credit report, which is what the banks use to determine if you’re a slippery Steve when it comes to money.
And whilst having a credit card can show that you are able to handle debt, (assuming you’re paying it off) having a number of cards can actually negatively effect your credit score.
If you feel like you need to have more money that’s not yours, ask for a higher credit limit instead of getting another card. Easy.
Failing to pay on time
In the finance game, they call this one “COMMON CENT$”.
Really though, it’s like any bill, pay it on time ya dingus! Failing to do so is going to mean a bad credit rating on top of the interest charges you’re already gathering.
And in case you were unaware, a bad credit rating will make your life hell when attempting to take out a loan for pretty much anything, including a new phone plan.
Making the minimum payment only
When you get your monthly statement, it tells you what the minimum payment amount is, as well as how long it will take you to pay off the card should you wish to stick to that amount.
Now, I don’t know about you, but to me, that length of time is like the punchline to really bad joke.
“How long does it take an idiot to pay off a bad debt?”
If my last statement is anything to go by, the answer is somewhere around twenty-seven years.
Twenty-seven god damn years. You might as well give the bank unbridled access to everything you own.
Pay off as much as you can as quick as you can to keep interest charges down and more money in your pocket.
Stop doing this. Just stop. The bank is laughing at you. And taking your money at the same time.
Using your credit card for cash advances incurs a higher interest rate than it would on normal purchases.
And it’s not a little bit more either, the rate on a cash advance is generally around 20%, which is up to 7% higher if you have a typical low interest card.
The only time you should be using this option is in an emergency. A real emergency. Like Will Smith is serving lemonade on the corner of your street, but is taking cash only and you’re bank account is empty.
Also, he’s playing the mandolin and your two favourite things are Will Smith and mandolins. That kind of emergency.
Spending for rewards
Rewards are great. Flybys will get you places and some cards will dole out cool stuff if you earn enough of whatever points they’re giving out.
But just because you want to go to Tahiti with your flybys points doesn’t mean you should be abusing your car. The only exception, of course, is if you’re paying off the balance immediately.
Be vigilant with your spending at all times, as careless debt has the potential to haunt you for a lifetime.